FRIDAY, NOVEMBER 28, 1986
14
BILL PROPOSES INSURERS TO MAINTAIN HK BUSINESS ACCOUNTS
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THE GOVERNMENT HAS PROPOSED TO AMEND EXISTING LEGISLATION TO REQUIRE INSURERS CARRYING ON LONG TERM BUSINESS TO MAINTAIN ACCOUNTS IN RESPECT OF THEIR HONG KONG BUSINESS ONLY.
A SPOKESMAN FOR THE MONETARY AFFAIRS BRANCH SAID THAT UNDER SECTION 22 OF THE INSURANCE COMPANIES ORDINANCE, INSURERS CARRYING ON LONG TERM BUSINESS IN HONG KONG ARE REQUIRED TO ESTABLISH A SEPARATE FUND FOR SUCH BUSINESS, ON A WORLDWIDE BASIS, AND MAINTAIN ACCOUNTS FOR IDENTIFYING THE ASSETS AND LIABILITIES OF THAT FUND.
+THE MAIN PURPOSE OF THE INSURANCE COMPANIES (AMENDMENT) BILL 1986, PUBLISHED IN THE GAZETTE TODAY, SERVES TO EMPOWER THE INSURANCE AUTHORITY TO AUTHORISE AN OVERSEAS INSURER WHICH IS UNABLE TO COMPLY WITH THAT SECTION TO MAINTAIN ACCOUNTS IDENTIFYING ASSETS AND LIABILITIES ATTRIBUTABLE TO ITS LONG TERM BUSINESS CARRIED ON IN HONG KONG ONLY, HE SAID.
THE SPOKESMAN SAID THE EXISTING REQUIREMENT HAD BEEN DRAWN UP AFTER CAREFUL DELIBERATION.
HE SAID THE MOST EFFECTIVE PROTECTION WOULD BE REQUIRING THE INSURER'S ASSETS REPRESENTING THE INSURER'S LIABILITIES TO THE POLICY HOLDERS TO BE LOCATED IN HONG KONG SO THAT, IN THE EVENT OF THE INSURER BEING WOUND UP, THE LIQUIDATOR COULD SECURE THESE ASSETS TO MEET THE INSURER'S LIABILITIES TO THE POLICY HOLDERS.
+ DURING THE DELIBERATIONS LEADING TO THE ENACTMENT OF THE INSURANCE COMPANIES ORDINANCE IN 1983, SUCH LOCALISATION OF ASSETS WAS HOWEVER CONSIDERED TO BE INCOMPATIBLE WITH HONG KONG'S OPEN ECONOMY AND FREE INVESTMENT ENVIRONMENT, AND NOT, GIVEN THE RELATIVE IMMATURITY OF HONG KONG'S CAPITAL MARKETS, IN THE BEST INTERESTS OF POLICY HOLDERS, THE SPOKESMAN SAID.
+ THE ORDINANCE, THEREFORE, HAS ADOPTED THE APPROACH OF A QUALIFIED PROTECTION IN THE FORM OF SECTION 22, WHICH IS ESSENTIALLY AN ACCOUNTING REQUIREMENT,+ HE ADDED.
THE SPOKESMAN SAID THE EFFECTIVENESS OF THIS QUALIFIED PROTECTION DEPENDED ON THE INSURANCE AUTHORITY'S VIGILANCE IN MONITORING THE FINANCIAL CONDITION OF AN INSURER AND THE WIDE DISCRETIONARY POWERS GIVEN TO HIM UNDER THE ORDINANCE.
DAMIRISA
+FOR INSTANCE, WHERE THE INSURANCE AUTHORITY HAS CAUSE FOR CONCERN OVER THE STABILITY OF A PARTICULAR INSURER, HE CAN EXERCISE HIS POWERS TO COMPEL THE INSURER CONCERNED TO MAINTAIN ASSETS IN HONG KONG SUFFICIENT TO MEET ITS DOMESTIC LIABILITIES AND TO HAVE THOSE ASSETS HELD ON THE INSURER'S BEHALF BY A TRUSTEE APPROVED BY THE INSURANCE AUTHORITY,+ HE SAID.
/THE SPOKESMAN